In South Dakota, wind facilities constructed after July 1, 2007 and solar facilities, are subject to an alternative taxation calculation in lieu of all taxes on real and personal property levied by the state, counties, municipalities, school districts, and other political subdivisions. The definitions of "wind farm" and "solar facility" include only facilities producing electricity for commercial sale that have a minimum capacity of 5 megawatts (MW). All property used or constructed to interconnect individual wind turbines or solar panels within a renewable energy facility into a common project, termed the "collector system," is eligible for the exemption and alternative taxation.

The alternative taxation method has two components. The first component is an annual tax equal to $3 per kilowatt (kW) of capacity of the wind or solar facility, prorated according to when the facility begins operation during the first calendar year.

The second component differs for wind systems producing power for the first time between July 1, 2007 and March 31, 2015, wind systems producing power for the first time after March 31, 2015, and for solar facilities. Wind energy systems producing power for the first time between July 1, 2007 and March 31, 2015 pay an annual tax of $0.00065 per kilowatt-hour (kWh) of electricity produced. Wind energy systems producing power for the first time after March 31, 2015 pay an annual tax of $0.00045 per kWh of electricity produced. Solar facilities pay an annual tax of $0.00090 per kWh of electricity produced.

The money generated by the alternative taxation method described above will be deposited into the state's renewable facility tax fund. All of the receipts from the capacity tax and 20% of the production tax will be redistributed back to the county treasurer of the county (or counties) where the wind or solar facilities are located before May of each year. The funds must be distributed among the school districts, the county, and the organized townships.